What else do you need to know about how these popular education savings accounts work? Whether you're new to 529 plans or you're a college-savings veteran, put your knowledge to the test with our 12-question quiz. It'll help you better understand this valuable—yet sometimes confusing—savings tool.

Quiz | How Well Do You Know 529 Plans?

Question 1 of 12

You can invest only in your home state's 529 plan.

Quiz | How Well Do You Know 529 Plans?

Question 1 of 12

You can invest only in your home state's 529 plan.

You can invest in any state's 529 plan, no matter where you live. But the advantages might be limited if you're not a resident. Shop around for the program that's right for you.

Quiz | How Well Do You Know 529 Plans?

Question 2 of 12

How are 529-plan distributions taxed by the federal government if used for qualified expenses?

Quiz | How Well Do You Know 529 Plans?

Question 2 of 12

How are 529-plan distributions taxed by the federal government if used for qualified expenses?

You can withdraw your money from a 529 plan tax-free as long as you spend it on qualified college expenses or eligible tuition for kindergarten through 12th grade.

Quiz | How Well Do You Know 529 Plans?

Question 3 of 12

Which school cost is not a qualified expense for a 529 plan?

Quiz | How Well Do You Know 529 Plans?

Question 3 of 12

Which school cost is not a qualified expense for a 529 plan?

You can use a 529 to cover the cost of college books, tuition, school fees, and room and board, but not to repay student loans.

Quiz | How Well Do You Know 529 Plans?

Question 4 of 12

What is the penalty for nonqualified withdrawals?

Quiz | How Well Do You Know 529 Plans?

Question 4 of 12

What is the penalty for nonqualified withdrawals?

A nonqualified distribution is subject to income tax and a 10% penalty on earnings.

Quiz | How Well Do You Know 529 Plans?

Question 5 of 12

A big perk of 529s is that they're not taxed by Uncle Sam. You can also claim a state income-tax deduction for your contributions to a 529 plan.

Quiz | How Well Do You Know 529 Plans?

Question 5 of 12

A big perk of 529s is that they're not taxed by Uncle Sam. You can also claim a state income-tax deduction for your contributions to a 529 plan.

Thirty-four states and the District of Columbia offer tax incentives for 529-plan participants. (See www.savingforcollege.com for details on all plans.) If your state's 529 plan has a tax break, investing in that plan usually makes sense... Read more ˅

Thirty-four states and the District of Columbia offer tax incentives for 529-plan participants. (See www.savingforcollege.com for details on all plans.) If your state's 529 plan has a tax break, investing in that plan usually makes sense. The state tax break will trump lower fees in an out-of-state program. Less ˄

Quiz | How Well Do You Know 529 Plans?

Question 6 of 12

A handful of states give residents a tax break even if they invest in an out-of-state 529 plan.

Quiz | How Well Do You Know 529 Plans?

Question 6 of 12

A handful of states give residents a tax break even if they invest in an out-of-state 529 plan.

Six states (Arizona, Kansas, Minnesota, Missouri, Montana and Pennsylvania) give residents the tax break no matter where they choose to invest their money.

Quiz | How Well Do You Know 529 Plans?

Question 7 of 12

How many times can you change your 529-plan investments each year?

Quiz | How Well Do You Know 529 Plans?

Question 7 of 12

How many times can you change your 529-plan investments each year?

Tricky one. You used to only be allowed to make changes to your existing 529 investments once a year. But an update to the rules now allows you to make adjustments two times per calendar year. (You can change the investment allocation for new money coming in—future contributions—as many times as... Read more ˅

Tricky one. You used to only be allowed to make changes to your existing 529 investments once a year. But an update to the rules now allows you to make adjustments two times per calendar year. (You can change the investment allocation for new money coming in—future contributions—as many times as you want.) The added flexibility may be nice if you rebalance regularly, but be careful not to make too many changes. Many 529 plans invest via target-date funds anyway, so the fund managers tend to take care of any tweaks necessary to keep your allocations on point. Less ˄

Quiz | How Well Do You Know 529 Plans?

Question 8 of 12

The maximum total contribution you can make to a 529 plan depends on the state, but it's usually about...

Quiz | How Well Do You Know 529 Plans?

Question 8 of 12

The maximum total contribution you can make to a 529 plan depends on the state, but it's usually about...

There are no annual limits to how much you can contribute to a 529 plan (although you have to watch out for gift taxes on contributions over a certain amount). But the maximum balance allowed for a 529 account is usually $250,000, depending on your plan's state.

Quiz | How Well Do You Know 529 Plans?

Question 9 of 12

How much can you contribute annually to each child's 529 without incurring the federal gift tax?

Quiz | How Well Do You Know 529 Plans?

Question 9 of 12

How much can you contribute annually to each child's 529 without incurring the federal gift tax?

Although the basic amount you can give to a recipient free of the gift tax is $15,000 in 2018 ($30,000 per couple), when it comes to 529 plans you can stash five years’ worth of money at once ($75,000 or $150,000 per couple) as long as you agree not to make additional gifts to the same recipient f... Read more ˅

Although the basic amount you can give to a recipient free of the gift tax is $15,000 in 2018 ($30,000 per couple), when it comes to 529 plans you can stash five years’ worth of money at once ($75,000 or $150,000 per couple) as long as you agree not to make additional gifts to the same recipient for the next four years. Less ˄

Quiz | How Well Do You Know 529 Plans?

Question 10 of 12

Your son decides not to go to college after all. What happens to the money in his 529 account?

Quiz | How Well Do You Know 529 Plans?

Question 10 of 12

Your son decides not to go to college after all. What happens to the money in his 529 account?

You can change a 529 plan's beneficiary to be another family member at any time without a penalty. You could also choose to cash out and pay the taxes and penalties on the earnings portion of the withdrawal. The choice is yours, not the child's.

Quiz | How Well Do You Know 529 Plans?

Question 11 of 12

Can you withdraw money from a 529 account tax-free to pay rent for an off-campus apartment?

Quiz | How Well Do You Know 529 Plans?

Question 11 of 12

Can you withdraw money from a 529 account tax-free to pay rent for an off-campus apartment?

As long as you’re a student a least half-time, you can withdraw the cost of rent for the off-campus apartment up to the room-and-board allowance listed under the school’s calculation of the cost of attendance. (The figure is usually posted on the college’s website, or you can... Read more ˅

As long as you’re a student a least half-time, you can withdraw the cost of rent for the off-campus apartment up to the room-and-board allowance listed under the school’s calculation of the cost of attendance. (The figure is usually posted on the college’s website, or you can ask the financial aid office.) Less ˄

Quiz | How Well Do You Know 529 Plans?

Question 12 of 12

You can roll over the money in a 529 account to an ABLE account if your child has special needs.

Quiz | How Well Do You Know 529 Plans?

Question 12 of 12

You can roll over the money in a 529 account to an ABLE account if your child has special needs.

People of any age who developed a qualifying disability before age 26 can open an ABLE account and contribute up to $15,000 per year, which can be used tax-free for any expenses that benefit the person with the disability. And the new tax law now allows families to roll over money from a 529 to an A... Read more ˅

People of any age who developed a qualifying disability before age 26 can open an ABLE account and contribute up to $15,000 per year, which can be used tax-free for any expenses that benefit the person with the disability. And the new tax law now allows families to roll over money from a 529 to an ABLE account. You can roll over up to $15,000 from a 529 to an ABLE in 2018, minus any contributions that have already been made to the ABLE for the year. More than 30 states now offer ABLE accounts. See www.ablenrc.org for more information. Less ˄

Quiz | How Well Do You Know 529 Plans?

Results

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